Globalisation

1Introduction to international marketing-definition - differences b/w domestic and iB-EVOLUTION -nature - reasons/ benefits - stages of :internationalisation/ Globalisation- approaches of ib-Drivers of globalisation

What is International Marketing?Domestic MarketingCarried out within a defined national or geographic boundary Relatively free to plan, implement and control marketing plans within a known marketing environmentInternational MarketingBegins to explore markets outside national boundaries of domestic marketDirect and indirect exporting to neighbouring countriesThe need to manage uncontrollable international environmental elementsEmphasis on central production and planning with adaptation to different market conditions

What is Global Marketing?The notion that the world has no centre, but a borderless global marketplaceMarketing operations that seeks to lever its assets across political and cultural boundariesMaximising opportunities and exploiting marketing similarities and differences in search for global competitive advantage Seek to add stakeholders values by:organising world-wide effortsresearching of domestic and foreign markets pursuing international partnershipsSourcing of raw materials and support servicesReasons / Objectives of International MarketingAchieve Higher Rate of ProfitsExpand the production Capacities beyond the demand of the home countrySevere competition in the home countryLimited Home Market due to small population size or low purchasing powerIncrease Market ShareAvailability of technology and Managerial Competence4Nearness to Raw Materials Availability of Quality Human resources at low costLiberalization and GlobalizationPolitical Instability5Reasons / Objectives of International MarketingThere has been a significant shift and inclination towards IM after 1990s. The factors that have contributed towards IM are:Establishment of WTO Regional IntegrationDeclining Trade BarriersDeclining Investment BarriersGrowth in FDIStrides in Technology

6Factors Affecting IMDrivers of IM6Establishment of WTO : Post discussion by the member countries of GATT, WTO was established in Jan 1995 in order to facilitate implementation, administration, operation of the multilateral trade agreements.

7Factors Affecting IMDrivers of IM72.Regional Integration:EU, NAFTA, ASEAN were formed. This increased the size of market, demand and employment.EU: 25 member countries by 2005.Adopted common currency EuroPolitical boundaries erased for business activitiesGoods/ services/ people and capital can move freely No Import tariffs, tariffs replaced by community tariff systemHalf of the world exports/imports are from EUNAFTA: formed in Jan 1994 USA, Canada, Mexico16% of exports and 25% of imports in 2006

8Factors Affecting IMDrivers of IM8Declining Trade BarriersTariffs and quota reduced to encourage free flow of goods post World War II.USA reduced tariffs from 44% in 1913 to 3.9% in 2000Japan reduced tariffs from 30% to 3.9%.Declining Investment BarriersInvestment barriers imposed to protect domestic industries were reduced. Treaties were signed to promote and protect investment among countries.Bilateral treaties increased from 181 in 1980 to 2081 in 2006.Global production increased 8 times between 1950 to 2006.

9Factors Affecting IMDrivers of IM95. Growth in FDI:FDI is investment made by a company in a new manufacturing / marketing facilities in a foreign country.USA followed by UK was the largest provider and recipient of FDI.Strides in TechnologyPhenomenal change in Telecom and ITWitnessed asInternet and World Wide WebOnline GlobalisationMicroprocessors and telecomTransportation technology10Factors Affecting IMDrivers of IM10Factors Affecting IMChanges and ChallengesThe New Rules of Global EngagementA move away from the one-size-fits-all US-style capitalism towards a more localised, equitable economic developmentThe new challenge for global businessesAbility to adapt to changing market opportunitiesEmphasis on partnerships that will stimulate local businesses, create new opportunities and drive competitiveness for allThe New Global Economic ArchitectureEmergence of new economic powerhouses the BRICS countriesAsia to become the production hub and the West the service hubBy 2050, Asia will have the worlds most populated consumer markets with growing, young and highly educated populations Matching the Needs of New Global ConsumersConsumers born in the 1990s and 2000s grew up in digitally enhanced environments. They do not respond to conventional marketing stimulus as previous generationsEmergence of global consumers Convergence in global consumption patternsDiversity and subcultures

The New Breed of ConsumersExpectation of more customized products and services to cater to their individual needs

The Importance of Managing RelationshipsCustomer acquisition can cost up to 5 times more than retentionThe Pareto 80/20 ruleThe need to forge long-term and profitable relationships with customers as well as other stakeholders Achieving Global CompetitivenessThe challenge is to overcome:Shortening product life cycleDemand for high quality at low pricesThe green issueChanging rules of competitionDemanding customersKnowledge as a Source of Global Competitive AdvantagePeople and information (the knowledge base) are the most valuable assets in a service economyThe concept of knowledge management makes senseHow do we do it? Any step-by-step manual?The accountant asks: do we value it as cost or asset?Marketing Using New TechnologiesThe Internet and Communication Technologies (ICTs) revolutionThe nature of interaction between organization and customers have changedIncreasing interactivity and transparencyFragmentation of mediaCorporate Social Responsibility and EthicsGrowing interest and scrutiny in how organizations discharge moral and social responsibilitiesRequires constant monitoring and adaptation that involve:Regular risk assessments, marketing entry and withdrawal strategies, expatriation of funds etc.A potential source of competitive advantage21

Global Marketing EnvironmentIt can be defined as Those variables, largely out of the organizations control but which it must account for, within which it conducts its business globallyConsiderable variations between countries in the laws governing business conduct There is no global standard practice

Fig. 2.1 Reasons for accounting for international environmental factors

Fig. 2.3 Global Marketing Environment

The Political EnvironmentIncludes any national or international political factors which may affect an organizations decision making, planning, implementation, and control mechanismsMarketers have to work within the political framework of the host countryImportant question what role does the target markets government play in the economy? Its level of participation in economic development?Three Types of Political Risks:Ownership riskOperating riskTransfer riskWhat are the International Relations of the target markets government? Does it belong to a trading bloc or free trade area?The Legal EnvironmentKey Aspects of International Legal Environment: Local domestic laws can limit what can be exported/importedInternational laws patents, trademarks, copyrights and tariff reduction etc.If involved in disputes with international trading partners, the organization will need to understand the law systemsCase vs. code laws the former takes a case-by-case approach, the latter based on precedentThe Economic EnvironmentMarket potential can be gauged by assessing population size, growth, density, distribution, age distribution, disposable income and its distributionAn Economic Environmental Analysis can involve asking:How big is the population and at what rate is it growing?Where is the population located and how dense is it?What is the population age and distribution?What is its disposable income and distribution?Fig. 2.4 World Bank Classification of Economies(Based on GDP Per Capita)

Different Forms of International Market Agreement Type of AgreementExampleFree Trade AreaNAFTA, EEA & COMESACustom UnionMERCUSORCommon Market CACMEconomic UnionEUPolitical UnionUSA, CanadaBilateral or Multilateral TradeZimbabwe and China in ConstructionSectoral Free TradeMulti-fibre AgreementEconomic CooperationAsia Pacific Economic Cooperation (APEC)Trade Preference AgreementSouthern African Development Conference (SADC)Fig 2.5 Global economic facilitators

The Socio-Economic EnvironmentGlobal socio-cultural environment is manifested in a number of waysSocial class and income have significant impact on purchases of consumer goods and servicesSpain and Portugal are highest consumers of fish in the EU; Scandinavians consumed most bread and cerealsSwitzerland is the largest consumer of coffee in the world; Greece the smallestFrench the largest consumer of mineral waterGermans the largest consumer of beerThe impact of the ageing global populationThe increasing global trends of urbanisation

Approaches to the Study of CultureMaslow (1970): Hierarchy of NeedsLee (1966): Self Reference CriteriaHalls (1977): High and Low Context CulturesHofstede (2001, 1997): The four dimensions of power distance, individualism and masculinity and uncertainty avoidance Hampden-Turner and Trompenaars (1998)The Technological EnvironmentTwo principal drivers to global development:Speed of communication due to InternetReduction in cost of technologyAdvent of E-Commerce, E-Marketing and E-Data ExchangeGrowth of Internet Organisations and ConsumersRise of Global Media and the Global Communication IndustryThe breakthrough in nanotechnologyTechnology can be sustainable or disruptive

The Competitive EnvironmentCompetition is intensifying internationally and locally due to trade liberalization and privatizationAssessing competitors involve (Kotler, 2003):Identifying the organizations competitorsDetermining competitors objectivesIdentifying competitors strategiesAssessing competitors strengths and weaknessesEstimating competitors reactionsSelecting competitors to attack and avoidThe Currency EnvironmentWorld currency environment is worth billions annually e.g. derivatives market is estimated at US$88 billion per annumThe global financial market is interconnected, volatile and subject to extreme fluctuationsForeign exchange fluctuations are very unpredictable and can have far-reaching effects on a company's global operations

Pressure GroupsIncreased corporate transparency publication of ethical and green statementsCompanies now devise strategy to manage their relationships with pressure groupConsumers and pressure groups such as Greenpeace and Friends of the Earth want to see companies switch to cleaner and renewable energy sources